Opinion on proof of stake in future

Summary:

The debate over the best consensus protocol for blockchain has been ongoing, with arguments for both proof-of-stake (PoS) and proof-of-burn (PoB). While PoS has been criticized for giving responsibilities to coin holders that they cannot handle, PoB could be more secure as it requires miners to invest their coins to participate in consensus, thereby eliminating the "nothing at stake" problem. However, there are still concerns about the security of PoS systems, especially in terms of delegation, which can degenerate into a Proof-of-SquareSpace situation. Another issue with PoS systems is the difficulty of achieving optimal conditions where all coins are part of the stake, which rarely happens in practice. As a result, stakers with a certain percentage of the total available supply increase their significance in the system over time, leading to a system controlled by powerful entities. The discussion also touches on PoB's vulnerability to double-spending attacks and its energy dependence.On the other hand, the initial argument against PoS is that it tends towards oligopolistic control, but this is countered with evidence that there is no centralization pressure in any PoS mechanism. Additionally, the capital required to 51% attack a PoS chain can be made substantially greater than on a PoW chain, and the attacker stands to lose much more if the attack is successful. However, PoS has its own issues, such as the trade-offs required for the "security vs. liveness" guarantee, which some argue are incompatible with Bitcoin's objective of being a trustless digital cash.The conversation also briefly touches on the use of burned coins and VDFs as an alternative to PoW, though there are differing opinions on their effectiveness. Overall, the discussion highlights the complexities and nuances involved in choosing a consensus mechanism for cryptocurrency, with both PoS and PoW having their own strengths and weaknesses that must be carefully considered.The debate also touches on proof-of-burn and its security as an alternative to proof-of-work. While the "nothing at stake" problem proposed for PoS is not broken for PoB, concerns are raised about the technique's vulnerability to double-spending attacks and its energy dependence. The conversation turns towards punishments in PoS systems and how they can prevent the nothing at stake problem. However, Erik argues that punishment is not a sufficient mitigation of the nothing at stake problem and that PoS must be rejected as being critically insecure due to various problems such as nothing at stake.A proposal has been made to reduce the variation in block times by using a two-step Proof of Work (PoW) method. The first step involves using a VDF that takes around 9 minutes to solve while being subject to difficulty adjustments similar to the current PoW mechanism. Miners can show proof of work through this process. The second step is to use the current PoW mechanism with lower difficulty, which reduces the time taken to find a block to an average of one minute, also subject to difficulty adjustments. This approach significantly reduces the variation in block times.However, there is a potential weakness in VDFs since they are not inherently progress-free, and their sequential nature prevents it. As a result, miners who focus on improving the energy pumped into the VDF circuitry may gain an advantage over their competitors. This could lead to a winner-takes-all situation, increasing competition and energy consumption. The email sender suggests that if mining 0.1 seconds faster than competitors results in a competitive edge, then a single miner could become the only one mining globally. The email was sent by Michael Dubrovsky, founder of PoWx, who proposed the two-step PoW method to reduce variation in block times.In summary, the discussions surrounding the best consensus protocol for cryptocurrency involve complex and nuanced considerations, with both PoS and PoW having their own strengths and weaknesses. While there are concerns about the security of PoS systems, PoB presents its own set of challenges. Additionally, proposals such as the two-step PoW method aim to improve current protocols but come with their own potential weaknesses and challenges. Ultimately, the market will decide the most suitable consensus protocol for digital assets, but making bad technical decisions to appease the current political climate is anathema to Bitcoin.

Updated on: 2023-06-14T21:23:30.562849+00:00